If a fixed interest loan has been terminated (either for sale or some other reason) then are the break costs deductible? I think they'll be capital in nature, if so can it be spread over 5 years like LMI?
Depends. If broken for sale it would be a capital expense and not deductible against income, but against cGT. If broken for a refinance or to keep as is on variable then it would be deductible against income. See my tax tip Tax Tip 29: Timing the breaking of fixed loans https://propertychat.com.au/community/threads/tax-tip-29-timing-the-breaking-of-fixed-loans.3281/
John of course the residual borrowing expenses would also become deductible when the loan is paid out. That cost may also be capital if it relates to sale, rather than to refinance to a different lender, term etc. Incurring break costs well before a sale is considered may be a strategy.
? . The problem ones are when the owner doesn't break the fixed rate and the bank does it for them at settlement. That's fatal. Instead I would think if it was broken well before putting property on market that a reasonably arguable position can establish the break to variable rate was made based on a perception based on rates themselves. The longer the time the better. The week before = Fail. Several month far better.
